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In 2004, Biocon Ltd., an Indian company that developed biopharmaceuticals for sale in developed countries, introduced cardio-diabetes products as part of its first line of generic drugs. NH started using the drugs, which were estimated to be up to 80% cheaper than the market rate for similar medication. “We are a cartel,” claimed Dr. Shetty. “Our connections to other heart hospitals means at our suggestion they, too, will start to use these products.” Again, this reflected a relentless emphasis on costs at NH.
The core cost savings, as explained by Dr. Shetty, were the staff salaries: “Compared to hospitals in the West which spend up to 60% of their revenues on staff salaries [including surgeons’ fees], the comparable percentage for salaries at NH is only 22%. This does not mean our doctors are poorly paid—rather, they work much longer hours [doctors at NH work an average of 12 to 16 hours a day] and perform more procedures.” Also, unlike doctors in other Indian hospitals, NH’s doctors received fixed salaries and not a percentage of the revenues they generated.
From its first day of operation, NH had a sufficient mix of paying and nonpaying patients to sustain its charitable mission (see Exhibit 12 for the breakdown of revenue received for procedures). “We have never had to turn away a patient for lack of funds,” stated Sreenath, a chartered accountant by profession, who had been with NH since it opened. The mission of providing below-cost care (where necessary) required careful planning and internal financial controls, and to this end, the finance department employed a unique daily accounting system whereby all revenue and costs for the day (including prorated salaries, cost of medical supplies, etc.) were accounted for.
In this way, the finance department—and thus the doctors who received this information and scheduled the surgeries—were able to gauge NH’s immediate ability to fund below-cost surgeries. “Of course there are days when our revenues during the month are low and we have had to postpone subsidized surgeries that are not urgent,” Sreenath explained. “But by monitoring our funds on a daily basis, we are able to plan how much good work we can do on any given day.” While the hospital maintained the typical end-of-month statements and annual financial reports, these were less important in the daily operations. “Looking at a balance sheet at the end of the year is like doing a postmortem,” Sreenath said. “By then, it would be too late for us.”
A major component of Dr. Shetty’s ambition to provide cardiac care to the rural poor was the use of telemedicine (see Exhibit 13 ). Since cardiac specialists were rare in remote areas, heart attack victims usually turned to general practitioners (GPs), who sometimes prescribed incorrect treatment due to lack of knowledge and/or facilities to correctly diagnose the problem. Dr. Shetty explained: “If a patient with chest pains walks in to see a GP, the doctor usually thinks it is indigestion, so he’ll be given an antacid and sent home . . . 24 hours later, the heart fails and it may be too late.”
Sensing the need for immediate treatment and care in rural areas, Dr. Shetty set up nine coronary-care units (CCUs) across India, linked to NH or RTI (depending on proximity). Each CCU was equipped with beds, medication, computers, electrocardiogram (ECG) machines, videoconferencing devices, and technical staff trained to operate the equipment. In addition, NH trained the GPs at the CCUs to perform checks on patients and administer treatment. With help from S.N. Informatics, a software development company located in Bangalore, NH also created a software program that allowed ECG images to be scanned and transmitted via a Web connection.
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